AM Best Revises Liberty Mutual’s Credit Rating Outlook to Positive; Affirms Ratings of Nationale Borg Reinsurance
AM Best has revised the outlook to positive from stable on the Long-Term Issuer Credit Ratings (Long-Term ICRs) of the members of Liberty Mutual Holding Company Inc. (LMHC), while affirming their Financial Strength Ratings (FSRs) of A (Excellent) and Long-Term ICRs of “a” (Excellent). The ratings agency also affirmed the FSR of A (Excellent) and Long-Term ICR of “a” (Excellent) for Nationale Borg Reinsurance N.V. (NB Re), maintaining stable outlooks for the reinsurer’s ratings.
The rating actions reflect changes in the financial outlook for Liberty Mutual, a major insurance group headquartered in Boston, Massachusetts, and the continued financial strength of its affiliated reinsurance operations. AM Best cited improvements in Liberty Mutual’s balance sheet strength, supported by stronger equity, positive underwriting income, higher investment income and improved risk-adjusted capitalization.
In a separate but related action, AM Best revised the outlook to positive from stable and affirmed the Long-Term ICRs of “bbb” (Good) for LMHC and its wholly owned subsidiary, Liberty Mutual Group Inc. (LMGI), both based in Boston. The agency also affirmed LMHC’s Long-Term Issue Credit Ratings. The companies operating as members of LMHC are collectively referred to as Liberty Mutual.
Although the outlook for Liberty Mutual’s issuer credit ratings has improved, AM Best maintained a stable outlook on the group members’ FSRs. This distinction reflects the agency’s assessment of the company’s financial condition, operating performance and credit profile across different rating categories.
For NB Re, based in Willemstad, Curaçao, AM Best affirmed its existing financial strength and issuer credit ratings with stable outlooks. The reinsurer’s ratings reflect its very strong balance sheet strength, adequate operating performance, limited business profile and appropriate enterprise risk management practices. Its connection to Liberty Mutual also provides important operational and financial support.
Liberty Mutual Benefits From Stronger Balance Sheet Performance
Liberty Mutual’s revised positive outlook reflects a measurable improvement in its balance sheet strength over recent years. AM Best noted that the group’s equity has increased significantly over the past two years, supported by positive underwriting income and higher investment income.
The growth in investment income has coincided with an expanding asset base and more favorable market conditions. Together, these factors have strengthened the group’s financial position and improved its capacity to absorb unexpected losses, manage claims obligations and support its insurance operations.
For a large property and casualty insurer, balance sheet strength is a critical measure of financial resilience. Insurance companies must maintain sufficient capital to meet policyholder claims, withstand changes in investment valuations and respond to periods of elevated claims activity. Stronger equity can provide additional protection against adverse developments and support continued underwriting operations.
AM Best currently assesses Liberty Mutual’s risk-adjusted capitalization at the strongest level, based on its Best’s Capital Adequacy Ratio (BCAR). This assessment indicates that the group’s capital position compares favorably with the risks associated with its insurance activities under the agency’s capital adequacy framework.
The improvement in capitalization is an important factor behind the positive outlook. Stronger capital resources can help insurers manage volatility from underwriting losses, catastrophe claims and financial market fluctuations while maintaining the ability to serve customers across multiple insurance segments.
Liberty Mutual also benefits from several sources of financial flexibility. Its membership in the Federal Home Loan Bank provides access to an additional source of liquidity, while its ability to access public capital markets supports its broader financing options.
Liquidity is particularly important for insurers operating at a large scale because significant claims payments and other obligations may arise during periods of market stress or elevated catastrophe activity. Access to additional funding sources can help an insurer manage short-term cash requirements without placing excessive pressure on its operating business.
The group’s balance sheet strength is further supported by a comprehensive reinsurance program involving highly rated reinsurers. Reinsurance allows insurers to transfer a portion of specified risks to other insurance companies, helping manage exposure to large individual losses and concentrated events.
AM Best also highlighted Liberty Mutual’s increased focus on reserving capabilities. Establishing appropriate reserves is essential to ensuring that insurers have sufficient funds set aside to pay claims as they develop and mature. Improvements in reserving practices can strengthen financial reporting, reduce uncertainty surrounding future liabilities and support confidence in an insurer’s capital position.
Together, stronger equity, improved capitalization, additional liquidity resources, reinsurance protection and enhanced reserving capabilities have contributed to the agency’s more favorable assessment of Liberty Mutual’s financial outlook.
Underwriting Improvements Support Operating Performance
AM Best continues to assess Liberty Mutual’s operating performance as adequate. The agency noted that the group’s strong net investment income has helped offset underwriting losses experienced in previous years.
Insurance companies generate earnings from two primary sources: underwriting activities and investment portfolios. Underwriting results reflect the relationship between premiums collected and the costs of claims, expenses and other insurance obligations. Investment income is generated from assets held to support policyholder liabilities and the company’s capital requirements.
When underwriting performance is weak, investment income can help stabilize overall earnings. However, sustained profitability also depends on the insurer’s ability to price risks appropriately, control claims costs and maintain disciplined underwriting standards.
Liberty Mutual has recorded improvements in underwriting performance in more recent years. AM Best attributed these developments to a renewed focus on underwriting criteria and risk selection. These measures are designed to ensure that insurance risks are evaluated carefully and that premiums more accurately reflect the potential costs associated with the policies being written.
Improved underwriting profitability can strengthen an insurer’s long-term financial position by reducing dependence on investment returns to support earnings. It can also help generate additional capital through retained profits, reinforcing the balance sheet improvements identified by AM Best.
Liberty Mutual’s scale and market position provide advantages as it works to improve underwriting results. The company operates across multiple insurance segments and serves a broad customer base through various distribution channels. This reach can support risk diversification, customer access and the ability to adjust products and pricing in response to changing market conditions.
Technology and value-added services also contribute to the group’s competitive position. Digital capabilities can help insurers evaluate risks, process claims, improve operational efficiency and provide customers with more accessible services. When combined with disciplined underwriting, these capabilities can support better business decisions and stronger cost management.
Nevertheless, Liberty Mutual continues to face challenges common across the property and casualty insurance industry. Weather-related losses remain a source of uncertainty, as severe storms and other natural events can produce substantial claims. The frequency and severity of these events can affect underwriting results, particularly when losses exceed expectations or occur across multiple regions.
Private passenger automobile insurance also remains exposed to inflationary pressures. Higher repair costs, vehicle replacement expenses, medical costs and other claims-related expenses can increase the amount insurers pay to settle claims. If premium adjustments do not keep pace with rising costs, underwriting margins may come under pressure.
These risks mean that continued improvement in underwriting discipline and claims management will remain important to Liberty Mutual’s financial performance. Although the group has made progress, its operating results will continue to depend on how effectively it balances pricing, risk selection, claims costs and investment income.
Extensive Business Profile Provides Diversification
Liberty Mutual maintains an extensive business profile as one of the largest personal and commercial insurance providers in the United States and international markets. Its widely recognized brand, broad customer base and range of insurance products support its competitive position across the property and casualty sector.
The group offers a variety of personal and commercial insurance products, providing exposure to different customer segments, industries and risk categories. This diversification can help reduce reliance on any single line of business and provide greater flexibility when market conditions change.
Personal insurance generally serves individuals and households, while commercial insurance addresses the needs of businesses and other organizations. These segments can experience different claims trends, pricing cycles and competitive pressures. A broad portfolio allows an insurer to respond to these differences through adjustments in underwriting strategy, product offerings and distribution.
Liberty Mutual’s multiple distribution channels are another important component of its business profile. Access to customers through different channels can expand market reach and provide flexibility in how products are marketed, sold and serviced. A diversified distribution network may also help the group adapt to changing customer preferences and competitive developments.
The company’s size can provide operational advantages, including the ability to invest in technology, develop specialized insurance capabilities and spread certain administrative costs across a large portfolio. These advantages can support efficiency and strengthen the group’s ability to compete in established markets.
However, a large and geographically diversified operation also creates management challenges. Insurers must monitor risks across multiple business lines, jurisdictions and customer segments while maintaining consistent underwriting standards and financial controls. The group’s enterprise risk management framework therefore plays an important role in supporting its overall financial stability.
AM Best considers Liberty Mutual’s business profile favorable. Its scale, recognized brand, broad range of personal and commercial property and casualty products, and diverse distribution channels provide a foundation for navigating changing insurance market conditions and underwriting cycles.
Enterprise Risk Management Supports Ratings
AM Best considers Liberty Mutual’s enterprise risk management (ERM) practices appropriate for the size, complexity and geographic reach of the organization. The agency described the group’s risk management framework as comprehensive and sophisticated, noting that risk management is integrated throughout its worldwide operations.
For a global insurance organization, ERM involves identifying, measuring, monitoring and managing the risks that could affect financial performance and the ability to meet policyholder obligations. These risks may include underwriting volatility, catastrophe exposure, investment market movements, liquidity requirements, operational disruptions and changes in the regulatory environment.
An effective ERM framework enables an insurer to evaluate how different risks interact rather than examining each exposure in isolation. For example, a major catastrophe can increase claims costs while also affecting investment markets or liquidity requirements. Coordinated risk management helps insurers assess these potential effects and prepare appropriate responses.
Liberty Mutual continues to refine its risk management capabilities. Ongoing improvements can help the group respond to emerging risks, strengthen internal oversight and maintain appropriate controls as its operations evolve.
The importance of ERM is particularly significant for insurers with extensive international operations and diverse insurance portfolios. Different markets may present distinct regulatory requirements, customer needs and exposure patterns. A coordinated framework can help maintain consistency while allowing individual business units to address their specific risks.
AM Best’s assessment indicates that Liberty Mutual’s risk management practices appropriately support its ratings. Combined with stronger capitalization and improvements in underwriting performance, the group’s ERM capabilities form part of the broader foundation underpinning the revised positive outlook.
Financial Leverage and Access to Capital Remain Important
Liberty Mutual’s ratings also benefit from its financial leverage position. AM Best noted that financial leverage at the holding company level has historically remained below 30% and currently stands below 20%.
Financial leverage measures the extent to which a company relies on debt and other financing obligations relative to its capital structure. For an insurance holding company, leverage levels can influence financial flexibility, debt-servicing capacity and the ability to provide support to insurance subsidiaries.
A lower leverage ratio can give a company greater flexibility to respond to unexpected financial pressures, pursue strategic priorities and access additional financing when needed. It can also reduce the risk that debt obligations will place excessive pressure on available resources during periods of weaker operating performance.
Interest coverage is another relevant measure because it indicates the extent to which earnings or operating resources are available to meet interest expenses. According to AM Best, Liberty Mutual’s interest coverage ratios have varied over time but have improved since 2024 as operating profitability increased significantly.
Stronger operating profitability can improve a company’s ability to service debt and support confidence in its financial structure. Improvements in interest coverage may also provide greater flexibility when managing future financing requirements.
AM Best further noted that Liberty Mutual’s access to liquidity has helped offset concerns related to its financial profile. Access to funding through public capital markets, together with other liquidity resources, can support the group’s ability to manage financial obligations.
The combination of financial leverage below 20%, improved interest coverage and access to liquidity provides additional support for Liberty Mutual’s ratings. These factors complement the group’s stronger equity position and risk-adjusted capitalization.
Although the positive outlook reflects improving conditions, continued attention to leverage, debt servicing and liquidity will remain important as the group manages its large insurance operations and exposure to industry-wide risks.
AM Best Affirms Ratings for Nationale Borg Reinsurance
Alongside the rating actions involving Liberty Mutual, AM Best affirmed the Financial Strength Rating of A (Excellent) and Long-Term Issuer Credit Rating of “a” (Excellent) for Nationale Borg Reinsurance N.V. The company is based in Willemstad, Curaçao, and its ratings retain stable outlooks.
NB Re’s ratings reflect a balance sheet strength assessment of very strong, adequate operating performance, a limited business profile and appropriate enterprise risk management. AM Best also considers the explicit and implicit support the company receives from the broader Liberty Mutual enterprise.
This support includes access to infrastructure, management resources, operational assistance and reinsurance coverage. These connections are important to the assessment because NB Re operates within the wider Liberty Mutual organization and benefits from resources and capabilities provided by the group.
For a reinsurer, financial strength is especially important because its obligations arise from insurance risks accepted from other insurers. Its ability to meet claims and other contractual commitments depends on capital adequacy, asset quality, reserving practices and effective management of remaining liabilities.
AM Best’s decision to affirm NB Re’s ratings indicates that the agency continues to view the company’s financial position and operating arrangements as consistent with its existing ratings. The stable outlook reflects the agency’s assessment of the reinsurer’s current circumstances and expected management of its remaining business.
Capital Adequacy and Conservative Investments Support NB Re
AM Best’s assessment of NB Re’s balance sheet strength reflects risk-adjusted capitalization currently at the strongest level, as measured by BCAR. The agency also noted that the company’s capital remains sufficient from a regulatory perspective.
This assessment is notable because NB Re’s equity has experienced some variability over the past several years, partly because of net losses earlier in the period. Changes in equity can affect an insurer’s financial flexibility and its capacity to absorb further losses, making capital adequacy an important consideration in the ratings process.
Despite this historical variability, AM Best considers NB Re’s current capitalization sufficient to support its remaining obligations and risk profile. The agency’s assessment also considers the quality of the company’s investment portfolio.
NB Re maintains a conservative investment portfolio that primarily uses cash and fixed-income investments. Such assets can provide relatively predictable cash flows and may help limit exposure to the greater price volatility associated with riskier investments. Asset quality is particularly relevant to an insurer or reinsurer that must retain sufficient resources to meet future claims.
A conservative investment strategy can support financial stability by reducing the likelihood that significant market losses will undermine capital at a time when claims obligations must be met. Nevertheless, investment portfolios remain subject to interest-rate movements, credit risks and other market conditions.
NB Re’s capital position and investment quality are therefore key components of AM Best’s very strong balance sheet strength assessment. The support provided by Liberty Mutual’s broader infrastructure and operational resources further contributes to the company’s overall credit profile.
Discontinued New Business and Runoff Management
NB Re has discontinued issuing new policies, and most renewals are being placed on affiliated paper. As a result, the company’s operating activities increasingly focus on servicing existing policies and managing the gradual runoff of its remaining liabilities.
In an insurance runoff, a company generally stops taking on new business while continuing to administer existing policies and settle claims as obligations develop. The process requires careful oversight of reserves, claims handling, contractual commitments and available capital.
AM Best continues to assess NB Re’s operating performance as adequate. Based on the historical performance of the company’s business and loss reserves, the agency anticipates that its remaining liabilities will run off adequately over time.
However, the runoff process may not produce consistent results in every reporting period. Insurance claims can develop over several years, and updated information about the severity or frequency of losses may require adjustments to previously established reserves. As a result, adverse reserve development can affect earnings even after a company has stopped writing new policies.
AM Best identified variability in NB Re’s results in 2022 and 2023, when adverse loss reserve development involving an overseas bond program led to significant net losses in each year.
The program has since been settled. Following that settlement, NB Re recorded relatively break-even operating performance in 2024 and 2025. This improvement supports the agency’s expectation that the company can continue managing its remaining obligations under its existing business.
AM Best expects NB Re to continue servicing its remaining policies through expiration, including renewals of multiyear policies. Managing these commitments will require ongoing attention to claims administration, reserve adequacy and the financial resources needed to meet contractual obligations.
Although the discontinuation of new policy issuance reduces the company’s exposure to new underwriting risks, it does not eliminate the potential for claims volatility. Existing liabilities can continue to develop, and the final cost of certain claims may differ from earlier estimates. Effective runoff management will therefore remain central to maintaining NB Re’s financial position.
The rating actions highlight different developments within the Liberty Mutual enterprise. For Liberty Mutual, the positive outlook on the relevant issuer credit ratings reflects stronger balance sheet metrics, significantly increased equity, improved underwriting results and higher investment income. The group’s strongest-level risk-adjusted capitalization, access to liquidity and financial flexibility provide additional support.
At the same time, AM Best continues to assess Liberty Mutual’s operating performance as adequate and recognizes ongoing industry pressures, including weather-related losses and inflation in private passenger automobile claims. The group’s future results will depend partly on its ability to sustain underwriting discipline, manage claims costs and maintain sufficient capital.
For Nationale Borg Reinsurance, the affirmation of existing ratings with stable outlooks reflects its very strong balance sheet strength, adequate operating performance and connection to Liberty Mutual. Its conservative investment portfolio and strongest-level BCAR capitalization support the assessment, while its discontinued new-business activity places greater emphasis on managing existing policy obligations and completing the runoff process.
Taken together, the actions underscore the importance of capital strength, underwriting performance, liquidity and risk management in evaluating insurance companies and reinsurers. Liberty Mutual’s improving financial metrics have prompted a more favorable outlook on its issuer credit ratings, while NB Re’s affirmed ratings reflect the agency’s continued confidence in its capital position and its ability to manage remaining liabilities over time.
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